More than 130 billion pounds of food — worth $161 billion dollars — are wasted each year. That’s 30-40% of the U.S. food supply. Beyond the obvious missed opportunity for wasted food to feed hungry families, food waste also has pernicious effects on the environment. Rotten food in landfills produces methane, a gas almost 30 times more potent than carbon dioxide in its damaging effects on the ozone layer. 

While most people associate wasted food with half-eaten apples or spoiled meat, another kind of food waste contributes tons of material to landfills each year. Certain food production processes create waste byproducts. Notably, the production of beer outputs a tremendous amount of spent grain, which constitutes 85% of total byproducts from brewing.

Every gallon of beer brewed produces roughly 1.7 pounds of wet spent grain. While spent grain sounds like a useless byproduct, it is actually a valuable resource. Spent grain is low in sugar and rich in fiber, protein, and several healthy vitamins and minerals. This brewing byproduct — commonly regarded as useless — could actually play a major role in creating a more sustainable food supply chain and delivering healthier meals and snacks to our entire society.

ReGrained is a sustainable food company transforming spent grain and other food production byproducts into healthy ingredients and snacks. By giving a second life to nutritious matter incorrectly labeled as “waste,” ReGrained is improving the sustainability of our food supply chain and delivering a 21st century solution to poor diets and climate change. 

ReGrained’s founder used to brew homemade beer in college and realized that the process produced a remarkable amount of grain that was simply being thrown away. ReGrained was born to develop a technologically-advanced scientific process (in partnership with the USDA) to refine spent grain into “upcycled ingredients” like the company’s flagship product, ReGrained SuperGrain+. 

ReGrained uses its proprietary upcycling process to transform spent grain into food-ready SuperGrain+, a type of flour. The company is forging partnerships with major food and beverage manufacturers to replace their flour supply with SuperGrain+, which offers a healthier and more sustainable alternative to traditional grain ingredients. While ReGrained’s current partners are under wraps, the company is reportedly working with 30+ global and national consumer packaged goods (CPG) brands, private label brands, and meal kit chains to incorporate SuperGrain+.

These ingredient partnerships are the primary tenet of ReGrained’s business model, particularly as the company further scales its SuperGrain+ manufacturing processes. At this time, though, ReGrained also generates revenue by selling its own line of CPG products: salty snack crisps and snack bars. These products are available in retailers nationwide — including Whole Foods and REI — and are also sold online. The ReGrained CPG line currently generates the bulk of the company’s revenue, pending transition into better-scaled SuperGrain+ manufacturing.

In 2019, ReGrained generated $359,432 in revenue and posted a net loss of more than $1.66 million. The company has grown significantly this year, though, and reports almost $500,000 in revenue between January and April of 2020 alone. ReGrained is currently raising a significant capital round, with $1.53 million already committed from leading strategic investors including MolsonCoors and Barilla. The company is carving out a maximum of $535,000 from this round to be raised on Wefunder, at a $14.5 million pre-money valuation.

ReGrained was founded by CEO Daniel Kurzrock, who previously worked in sales and demand generation (both as an account executive and consultant) before transitioning full-time to ReGrained. Kurzrock graduated from UCLA in 2012 with a bachelor’s degree in economics. He is a Forbes 30 Under 30 winner and also leads two upcycled/natural food non-profits related to his work with ReGrained. 

ReGrained’s COO and CFO is Dalton Allen, who appears to work part-time for ReGrained in addition to managing an additional food-related company. Allen has over 20 years of experience in executive roles for a variety of corporations, including Get Sponsor, Broker Builders, and FPT Software.

ReGrained is still in the process of scaling its manufacturing capabilities to cement ingredient partnerships as the core of its business model. This capital raise is intended to fund the preparation of a new manufacturing facility in Berkeley, CA, and to conduct additional research and development on SuperGrain+ and other product lines.

Beyond ReGrained’s current flagship product, the company intends to develop additional upcycled ingredients, beginning with an oat-related product created from the byproducts of oat milking. Fruit pulp or pomace (the solid remains of fruit after pressing for oil or juice) is another area of future upcycled ingredient development. 

ReGrained’s ultimate vision is to lead as a “global platform for commercial innovation with upcycled foods.” The company hopes to continue partnering with major CPG brands and other actors in the food supply chain. The ultimate goal is replacing less sustainable alternatives with ReGrained ingredients in products throughout every aisle of the grocery store.

• Diversified streams of revenue boost short-term performance and fund long-term assets: ReGrained operates with an innovative business model that combines both direct-to-consumer/retail-based CPG sales with high-value partnerships with major corporations. CPG sales can generate revenue much more quickly than R&D-intensive manufacturing gains. Those revenues can fund longer-term investment in production facilities, product line development, and operations during the long sales cycles inherent to valuable B2B partnerships. Either side of ReGrained’s business is an attractive investment opportunity. The combination of both revenue streams to further an ultimate goal is a unique advantage for ReGrained.

• Intellectual property is well-positioned for acquisition: ReGrained uses scientifically-advanced technology to convert spent grain into SuperGrain+. It will use additional proprietary processes to convert other food waste streams into more product lines in the future. This technology was produced in partnership with USDA and represents ReGrained’s most valuable asset. Major CPG brands are clearly interested in ReGrained’s upcycling technology already, as evidenced by their participation as strategic investors on ReGrained’s cap table. These deep partnerships are the first step toward an acquisition by one of these brands, which could yield a lucrative exit for ReGrained’s investors.

ReGrained combines traditional DTC sales of healthy, natural snack food with a much more ambitious set of B2B partnerships in the U.S. and abroad. By replacing less sustainable and less healthy ingredients with upcycled alternatives like SuperGrain+, ReGrained has the potential to significantly reshape the food supply chain toward repurposed, nutritious meals and snacks. 

ReGrained’s vision is audacious and requires significant investment in proprietary manufacturing technology, research, and development. Therefore, ReGrained’s current financial picture is not exactly rosy — the company is deeply unprofitable and lost over $1.6 million last year on roughly $360,000 in revenue. Any business with sizable scientific development expenses and long sales cycles inherent to high-value B2B partnerships presents a risk for investors. While more straightforward DTC companies can turn invested capital into revenue very quickly, ReGrained investors might wait years before the company generates meaningful revenue from current manufacturing setup. While the presence of major corporations like MolsonCoors and Barilla on ReGrained’s cap table is a helpful signal that the company does have high potential to close lucrative partnership deals, more detail on ReGrained’s current sales pipeline would be helpful in reassuring investors that revenue (hopefully higher-margin revenue) is soon to come. 

Once again, however, ReGrained has already forged meaningful relationships with partners and potential future buyers via its strategic investors, MolsonCoors and Barilla. Strategic investors such as these corporations typically contribute capital to companies that are highly related to the corporation’s key business model and are potential targets for future acquisition. MolsonCoors could reap significant value from selling its spent grain via ReGrained’s upcycled manufacturing processes after an acquisition. Barilla could cement ingredients like SuperGrain+ as a core component of its own production processes with the purchase of ReGrained. These avenues are the most likely opportunities for the company to achieve exit, but other acquisition opportunities (or an IPO if the company grows meaningfully) are also on the table.

ReGrained is a public benefit corporation working to reduce food waste and deliver healthy, sustainable ingredients to consumers worldwide. The company holds significant intellectual property assets that seem to be of strong interest to CPG corporations. It is also generating solid revenue from DTC snack sales to fund longer-term growth. Therefore, ReGrained is a Deal to Watch.